How is the law of forex in Islam? Muslims will see forex in terms of halal or haram according to their religious teachings. And to fulfill one of the conditions to avoid usury. Several brokers have offered Islamic accounts, such as TenkoFX, Instaforex, Firewoodfx, and so on.
With this Islamic account when traders open positions for more than one day or overnight. Their transactions are not subject to swap fees as calculated on the interest rate on the traded pair. So even if a trader opens a position for more than one week or months. It will not be deducted by swap fees like non-Islamic accounts.
For swing traders, this provides its own advantages by choosing an Islamic account because there are no swap fees. So profit will depend on price conditions and trading positions. Even non-Muslim traders also choose the type of Islamic account at registration because it is considered profitable for trading positions.
Then how exactly is forex in Islam? I will write from a number of sources to reveal whether forex is halal or haram or makruh which means between the two.
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Forex Law in Islam and Its Proposals
Referring to the fatwa stated by the Indonesian Scholar Council (MUI). There are several points for this forex trading with reference to the principle of buying and selling money transactions allowed with conditions such as:
- Not for speculation or profit.
- Should for transactions or savings.
- If the transaction is made in similar currencies, the value must be the same, and in cash [at taqabudh].
- If the transaction is of different types, it must be done at the exchange rate or exchange rate prevailing at the time of the transaction and made in cash.
- Al tsaman: The clarity of the type of exchange, namely dollars or other currencies in the form of goods that can be weighed.
- Clarity of transaction object: The clarity of the quality of the transaction object whether it has special, moderate, or poor quality. This is done to eliminate the ignorance of fi al aqd or reasons about the ignorance of the condition of the goods at the time of the transaction because it will cause disputes between the transactors and damage the transaction value.
The Indonesian Scholar Council issued a fatwa if currency trading transactions were allowed if they were not carried out for speculation.
This means that buying and selling currency will change the law to become haram if it is carried out on the basis of speculation because it is a type of gambling.
Unfortunately, if the currency trading is done only for profit then the law is illegal. However, forex trading is always aimed at making a profit from the change in the value of the currency and never aims for savings. With this, it can be concluded if forex trading is illegal.
Forex Law in Islam according to the Malaysian Majlis fatwa
In 2012 Majlis Fatwa Malaysia issued a law on Trading Foreign Currency Exchange by Individuals (Individual Spot Forex) through Electronic Platforms.
- Muzakarah agrees to decide that trading foreign exchange (forex) by individuals on an individual basis (individual spot forex) through the existing electronic platform is illegal because it contradicts the requirements of Islamic law and is also illegal from the state law.
- Therefore, Muslims are not allowed to engage in such currency trading.
- Muzakarah also presses that this decision does not apply to foreign exchange transactions through counters at licensed money changers and foreign exchange transactions conducted by financial institutions licensed under Malaysian law.
Islamic Law Regarding Forex Transactions
There are several requirements in Islam that relate to foreign exchange transaction issues such as our review below.
There is a Qobul consent
Foreign exchange transactions must be carried out with Qobul consent, which is an agreement to give and receive. The seller must deliver the goods and the buyer must also pay in cash and a Qobul consent can be made by verbal, messenger, or written. Buyers and sellers also have the full right to carry out and perform all legal actions, namely mature and sound-minded.
Meet the Terms of Sale and Purchase Transactions
The foreign exchange transactions carried out must also meet the requirements that are used as the object of the sale and purchase transaction. Such goods must be sacred items and not unclean goods and can provide benefits, can be handed over, and can be sold or purchased by the owner or the owner’s power or permission. In addition, items that are already on hand if the item is obtained in exchange.
Hadith About Buying and Selling in Islam
Hadith narrated by Ahmad bin Hambal and Al Baihaqi from Ibn Mas’ud
The sale and purchase of goods that are not carried out at the place of the transaction are allowed on the condition that the characteristics must be explained. If the goods match the information provided by the seller, the sale and purchase are valid. However, if it is not suitable, then the buyer has the right of Khiyar, which is allowed to continue or cancel the sale and purchase.
“Whoever buys something that he does not see, then he has the right to khiyar if he has seen it”. [Hadith of the Prophet narrated by Al Daraquthni from Abu Hurairah]
“And Allah has made buying and selling legal, and forbidden usury.” QS. Al-Baqarah :275
Hadith narrated by Al-Baihaqi and Ibn Majah
Buying and selling activities are only allowed if it is carried out on the willingness of both parties. [HR. Albaihaqi and Ibn Majah, and judged as authentic by Ibn Hibban].
“Actually, buying and selling can only be done on a voluntary basis (between the two parties)”
Hadith narrated by Muslim from Abu Sa’id al-Khudri
Rasulullah SAW said that in buying and selling gold in Islam it should be done with the same value and not added in part. In other words, the sale value must not exceed the value of the item.
“Do not sell gold with gold unless it is equal (value) and do not add a part over another part. Don’t sell silver for silver except for the same (value). And don’t add a part to some of the others, and do not sell the gold and silver which is not cash for cash. “
The Hadith of the Tirmidhi history of Amr bin Auf
In history, it is said that agreements made between Muslims can be made. However, if the agreement is haram or justifies what is haram then this is not allowed.
“Agreements can be made between Muslims. Except for agreements that prohibit what is lawful or justify what is haram. And the Muslims are bound by their terms except those that prohibit what is lawful or justify what is haram. “
The proposition regarding buying and selling
Among the arguments that show if the law of buying and selling currencies is punished with gold and silver or dinars and dirhams, it is done in cash and without the slightest debt or lending money in Islam.
Here are some propositions that demonstrate forex law in Islam.
Hadith narrated by Muslims as refers to forex law in islam
“Gold is sold for gold. Silver is sold for silver. Wheat is sold for wheat. Sya’ir (a type of wheat) is sold as sya’ir. Palm is sold as palm. And salt is sold with salt, (the measure/scale) must be the same and cash. Whoever adds or asks for additional then he has done usury. The giver and receiver in this case are the same. “
Al Bukhary dan Muslim
“Don’t sell any gold in exchange for gold but it is the same. And don’t exaggerate one of them over the other. Don’t sell silver in exchange for silver, but it is the same. And do not exaggerate one of them over the other. And do not sell one thing that is delivered in cash and exchanged for another that is not delivered in cash. “
Imam Malik and Al Baihaqi
And if he asks you to wait for a while until he enters his house first before he gives up his belongings, then don’t be willing to wait for him. In fact, I am afraid that you exceed the limit of halalness, and what is meant by exceeding the limit of halal is usury. Do not sell gold in exchange for gold but it is the same, and do not exaggerate one of them over the other. Do not sell silver in exchange for silver but it is the same, and do not exaggerate one of them over the other. And do not you sell one of them delivered in cash in exchange for another that is not delivered in cash. Do not sell silver in exchange for gold, one of which is not given in cash, while the other is given in cash. “
Transactions that are prohibited in Islam
In Islam itself, it has been regulated in such a way as to what transactions are allowed and what is not allowed or examples of prohibited buying and selling.
Done with carefully
Transactions must be carried out on the basis of the principle of caution and are not permitted if they are carried out on the basis of speculation or manipulation which contains elements of usury, gharar, risywah, tyranny, and immorality.
Types of Haram Transactions
Some transactions that are prohibited based on forex law in islam, the sense that they contain elements of usury, gharar, risywah, maizir, immorality, and tyranny include:
- Bai ‘al ma dum: Selling goods or Islamic securities that are not yet owned or short selling.
- Najsy: Making or making fake offers.
- Insider trading: Using inside information that is carried out to profit from a prohibited transaction.
- Provide misleading information.
- Margin trading: Carry out transactions with sharia securities and interest-bearing loan facilities for the settlement of sharia securities.
- Ihtikar or hoarding Is collecting sharia securities so as to cause the price of sharia securities with the aim of influencing other parties.
The views of scholars on forex
In the case of forex trading by scholars, there are differences of opinion between one and the other regarding forex law in Islam, so there is no single voice for this forex law. Like smoking, which some scholars allow, but other scholars forbid.
The opinion of Dr. Aznan Hassan from Sharia Community Maybank Islamic
In one videotape the essence of his opinion is:
- For currency exchange in MYR to USD, it should be applied on a spot basis and not on hold.
- Transactions conducted by financial institutions that use large volumes have different laws because they are guarded by sharia advisors.
- Market transactions before finance and forex options are not sharia.
Forex trading online
- Most brokers are not in Malaysia – don’t know there is a transaction or vice versa.
- Broker issue is it real or just speculation.
- Deferred or spot transactions. If resilient is not allowed.
- The issue of leverage is not allowed to be leveraged because it is not compliant with sharia and is not allowed by syarak.
Ustadz Zaharudin in forex law in Islam
- Forex trading is haram not to be carried out by financial institutions or individuals.
- Forex is divided into 2, namely Foreign Exchange. It’s like a money changer.
- Forex online trading is a commodity. Cannot trade or buy merchandise.
Ustadz Dusuki Scholars who allow forex
- Forex trading is the same as forex exchange at the airport and so on. The law must.
- There needs to be a margin.
- There are no elements of usury and gambling allowed. What kind of gambling? You’re signed in not based on the analysis.
- Not entering based on gambling, but with knowledge such as technical analysis and fundamental analysis for trading.
Ustadz AA in forex law in Islam
The conditions for forex trading are allowed there are 3;
- Hit the spot, can not be delayed.
- Do not use leverage, hit full margin.
- Pair with currency only, can not be other than currency.
There are 3 conditions for forex law in Islam, you can already trade forex according to my acquaintance Ustaz. But you have to find a broker who offers all this. I also do not explore the brokers involved and brokers that allow all this because for now I am more comfortable trading Futures Crude Palm Oil because it is halal and approved by the shariah panel of the Malaysian Securities Commission.
Conclusion
Since there are differences of opinion among scholars about forex trading, I personally conclude that forex law in Islam is makruh. This means that if left forex it is better but if it does not matter.
Because in trading before registering as a participant has agreed to all the risks that may be lost in trading. It is best to read the agreement carefully and about risk disclosure.
In forex trading, there is a sale and purchase agreement, where when a trader performs a buy action he has agreed to the current price and bears the risk when the value changes down for example.
While in the sale and purchase is the existence of a sale and purchase agreement. For example, Ani buys donuts for the price of a thousand, and the trader agrees with the price then there will be a sale, but if not then it will be canceled.
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